Around half of all this year's graduates will struggle to find full-time jobs for many months after leaving university if current employment trends continue, according to new research.

Analysis conducted by the Local Government Association (LGA) reveals that 51% of graduates were in full-time employment within three months from leaving university in 2010, the latest figures that are available, compared with 57% in 2003.

The analysis reveals there is huge variation in post-university employment levels across England and Wales, with some areas seeing around one in three (36%) graduates in full-time employment, while two in three (60%) are in work in other parts of the UK.

"These figures are particularly worrying at a time when thousands of young people are gearing up to go off to university with the hope of improving their job prospects," said Peter Box, leader of Wakefield council and chairman of the association's economy and transport board.

"Young people who are trying to get on the career ladder are instead finding themselves without a job and potentially falling into long-term unemployment. This can have scarring effects that last a lifetime and have a huge cost to the taxpayer in welfare and benefits," Box said.

The LGA analysis, which is based on figures published by the Higher Education Statistics Agency, also indicates that graduate under-employment is also on the increase. It suggests that the number of university leavers going into part-time employment has risen from 7% in 2003 to 11% in 2010. Between 2002 and 2010, the proportion of graduates who were considered to be unemployed also increased, from 6% to 8%.

The association's report discussing the findings, Hidden Talents: a Statistical Review of Destinations of Young Graduates, claims that the proportion of higher-education leavers going into any form of employment has reduced over the past seven years. It states: "In 2003, around 72% (100,855) of HE leavers were in some form of employment, which fell to 69% (114,750) in 2010."

Of the 20 local authority areas in England and Wales with the lowest proportion of graduates in full-time employment, 17 are in London, chiefly because the capital has a higher proportion of highly skilled jobs than other places and attracts a higher proportion of people looking for work.

Tower Hamlets had the lowest proportion of graduates in full-time employment (36.3%), while West Berkshire had the highest (60.9%).

Outside London, other black spots that created problems for graduates were Middlesbrough, Stockton-on-Tees, Leicester, Thurrock, Knowsley and Wolverhampton.

The largest three-year fall in the percentage of graduates in full-time employment was in Stoke-on-Trent – down by 14.7%.

However, a handful of areas bucked the downward trend with Bolton, Wakefield, Telford & Wrekin and Herefordshire all showing a small increase in the number of graduates in full-time employment.

The association called for the government to give councils and employers greater powers so that they could match training to jobs in local labour markets.

It also called for universities to work with them to ensure that students are offered careers advice in their final year that included information on the opportunities that are available in specific locations.

"Councils and employers best understand their local labour markets, and we want to work with universities to ensure graduates are not only equipped to take local jobs but that we are able to harness their talent to drive growth in our economies," Box said.

"We need to ensure that the skills people have make a better match with the jobs that are being created in a local area."